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CEI Equipment Co. v. Gaddis

Court of Appeals of Iowa

March 20, 2019

CEI EQUIPMENT COMPANY, Plaintiff-Appellant/Cross-Appellee,
v.
DONALD GADDIS and KAREN GADDIS, Defendants-Appellees/Cross-Appellants.

          Appeal from the Iowa District Court for Linn County, Sean W. McPartland, Judge.

         A manufacturer appeals a grant of summary judgment to former shareholders in an indemnity action. The former shareholders cross-appeal the denial of attorney fees.

          J. Scott Bardole of Andersen & Associates, West Des Moines, for appellant.

          David M. Caves and William T. McCartan of Bradley & Riley PC, Cedar Rapids, for appellees.

          Heard by Potterfield, P.J., and Tabor and Mullins, JJ.

          TABOR, JUDGE.

         CEI Equipment Company wants Donald and Karen Gaddis, one-time shareholders, to pay for its defense of products liability claims brought by an injured truck driver. More than three years before the driver sued CEI, the Gaddises sold their shares. In their stock purchase agreement (SPA), they agreed to several indemnification clauses with varying time limitations. The Gaddises now say CEI's request for indemnification is untimely under the SPA. Finding the SPA's unambiguous language did not include a time limit for this indemnification action, we reverse the grant of summary judgment in favor of the Gaddises, reverse the denial of CEI's motion for summary judgment, and remand to the district court for further proceedings. And, because the Gaddises are not the prevailing party in the summary judgment proceeding, we affirm the denial of attorney fees.

         I. Facts and Prior Proceedings

         The material facts are not in dispute. The Gaddises previously owned shares in CEI, a truck trailer design and manufacturing company. On December 17, 2012, they sold their shares to Normandie Holdings, LLC, under a detailed SPA. The SPA included terms indicating the Gaddises would indemnify CEI in the event of certain claims against them.

         On December 26, 2014, truck driver Barry Willets was injured when an auger manufactured by CEI broke away from its trailer and fell on top of him. In May 2016, he sued CEI, alleging defects in the auger's design and manufacturing.[1]

         In July 2016, CEI answered Willets's claims and filed a third-party petition against the Gaddises seeking to enforce the indemnity provisions of the SPA and for breach of contract. CEI insisted because the auger at issue was manufactured before the Gaddises sold their shares, they have a contractual obligation to indemnify CEI.

         Contending CEI's claims were time-barred under the SPA's indemnification provisions, the Gaddises sought summary judgment. CEI filed its own motion for summary judgment seeking an order that the Gaddises indemnify it against the claim. The district court granted the Gaddises' motion, denied CEI's motion, and dismissed the Gaddises from the action. The Gaddises filed an application for attorney fees against CEI, asserting the indemnity and breach-of-contract claims were frivolous. The district court denied their application.

         CEI appeals the district court's rulings on the cross motions for summary judgment; the Gaddises cross-appeal the denial of attorney fees.

         II. Scope and Standards of Review

         We review rulings on motions for summary judgment for correction of legal error. Deeds v. City of Marion, 914 N.W.2d 330, 339 (Iowa 2018). Summary judgment is proper if Gaddises established no genuine issue of material fact existed and they were entitled to judgment as a matter of law. See id. Summary judgment is also proper where the only issue to be decided is what legal consequences follow from otherwise undisputed facts. Emmet Cty. State Bank v. Reutter, 439 N.W.2d 651, 653 (Iowa 1989).

         III. ...


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